Question

How consumer value reduced by supply chain arrangements?

Answer 1

An effective Supply chain should be able to create 'value' i.e. in every step of the way, the product improves and the price of the item can increase.

A poor supply chain management can waste a lot of money, create more costs than actually adding any value.

For example, a dairy company requires the supply of Milk from villages every day.

The Supply chain should be managed in such a way that , all the milk is collected, No milk is wasted, brought to the factory, packaged and sold in the market.

However, a poor supply chain might not be able to collect milk from farmers, might not use refrigeration which means 10-20% of the milk is wasted in travel and might not be able to meet demand of the market.

Hence, the company won't be able to develop the amount of milk packs, quality and price it wants, leading to reduced consumer value.

I hope the example helped